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Hedge Funds Are Selling Lowe’s Companies, Inc. (LOW)

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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th. We at Insider Monkey have made an extensive database of more than 867 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Lowe's Companies, Inc. (NYSE:LOW) based on those filings.

Lowe's Companies, Inc. (NYSE:LOW) was in 60 hedge funds' portfolios at the end of September. The all time high for this statistic is 89. LOW investors should be aware of a decrease in hedge fund sentiment lately. There were 63 hedge funds in our database with LOW holdings at the end of June. Our calculations also showed that LOW isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let's take a gander at the fresh hedge fund action encompassing Lowe's Companies, Inc. (NYSE:LOW).

Can hedge funds beat the market
Can hedge funds beat the market

Bill Ackman of Pershing Square

Do Hedge Funds Think LOW Is A Good Stock To Buy Now?

At the end of September, a total of 60 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. By comparison, 83 hedge funds held shares or bullish call options in LOW a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Lowe's Companies, Inc. (NYSE:LOW) was held by Pershing Square, which reported holding $2076.6 million worth of stock at the end of September. It was followed by Soroban Capital Partners with a $936.7 million position. Other investors bullish on the company included Citadel Investment Group, Citadel Investment Group, and Adage Capital Management. In terms of the portfolio weights assigned to each position Pershing Square allocated the biggest weight to Lowe's Companies, Inc. (NYSE:LOW), around 21.94% of its 13F portfolio. Soroban Capital Partners is also relatively very bullish on the stock, earmarking 8.77 percent of its 13F equity portfolio to LOW.

Due to the fact that Lowe's Companies, Inc. (NYSE:LOW) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few money managers who were dropping their full holdings in the third quarter. Intriguingly, Benjamin A. Smith's Laurion Capital Management dropped the largest stake of the 750 funds tracked by Insider Monkey, valued at about $34.7 million in call options, and Donald Sussman's Paloma Partners was right behind this move, as the fund sold off about $28.3 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 3 funds in the third quarter.

Let's also examine hedge fund activity in other stocks similar to Lowe's Companies, Inc. (NYSE:LOW). These stocks are Unilever PLC (NYSE:UL), The Charles Schwab Corporation (NYSE:SCHW), Sony Group Corp (NYSE:SONY), BHP Group (NYSE:BHP), HDFC Bank Limited (NYSE:HDB), American Express Company (NYSE:AXP), and Bristol Myers Squibb Company (NYSE:BMY). This group of stocks' market caps are similar to LOW's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UL,17,876681,-2 SCHW,59,4578571,-13 SONY,19,388862,-1 BHP,18,899835,0 HDB,40,1794819,1 AXP,57,29603207,5 BMY,74,4758551,1 Average,40.6,6128647,-1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.6 hedge funds with bullish positions and the average amount invested in these stocks was $6129 million. That figure was $5080 million in LOW's case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand Unilever PLC (NYSE:UL) is the least popular one with only 17 bullish hedge fund positions. Lowe's Companies, Inc. (NYSE:LOW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LOW is 59.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on LOW as the stock returned 21% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.